Blind reliance on 26AS Statement to declare income or claim TDS puts you to what risks?

Blind reliance on 26AS Statement to declare income or claim TDS puts you to the risk of income tax notice for concealment and demand for subsequent mismatch of income/TDS or both.

I am sure, many of us would have witnessed persons who consider Government machinery as their accountant. Whether it is the turnover, purchases, interest income from bank or amount of tax deducted at source (TDS), for those persons, the sole and reliable source of the information is surprisingly not their own record but the online Tax credit statement, popularly known as Form 26 Statement.

Under the Income Tax Rules, every deductor is required to file quarterly return of TDS electronically giving details of amount of gross payment made, tax deducted and paid against each Permanent Account Number (PAN). Based on the PAN mentioned therein, these details automatically gets reflected in the 26AS Statement of a particular PAN holder (i.e. the assessee).

However logical it sounds, the inherent risk of placing blind reliance on the 26AS Statement can not be over emphasised. Experience shows that figures appearing in 26AS Statement of a deductor keep changing to accommodate correction statements filed by the deductors again and again. Often, these corrections are necessitated by the genuine mistakes of the deductors as and when those are pointed out by the assessee dedcutees. However, unfair practices have also been reported as one of the reasons for the revision of the 26AS.

Interestingly, presently there is no limit as to the time or the number of corrections allowed to a deductor with respect to its TDS returns. Large Government Departments and Banks have outsourced their TDS return preparation and filing work and data can be easily revised even without their explicit knowledge at any stage subsequent to original filing.

Therefore, it might so happen that an assessee who had filed its income tax return in absolute uniformity with 26AS Statement, gets a notice for income and / or TDS mismatch with 26AS Statement. As said, while the changes made could be due to bonafide mistakes, an illegitimate attempt can not be ruled out unless the assessee have reasons to believe that the corrections made was warranted, else a mysteriously disappeared TDS credit in 26AS Statement could land into some other PAN account depriving you the Tax credit.

So, what is most desirable that an assessee must obtain signed (digitally or manually) quarterly TDS certificates (Form 16, 16A) from the deductors for the amount paid and tax deducted by them and match them with their own records like bank statements, pay slip, bills etc. Not to mention that keep them safe at least for seven years. Please note that the duty to disclose income truly and fully is primarily cast on the assessee and even reliance on TDS certificate may not come to your rescue when it is in patent contradiction with the income as reflected by other corroborative records.

It has been further observed that the salaried class religiously rely on 26AS Statement and / or TDS certificates for income from other sources, more particularly, interest income from banks. With respect to amount earned as interest income on Fixed Deposits, the assessee is primarily dependent on the bank TDS certificates. However, in view of what is stated above, a prudent approach would be to obtain a “income certificate” from the bank/similar institutions and declare the income accordingly. later, even if 26AS Statement shows a different figure, the assessee would have the “interest certificate” to support his claim.